Mortgage company un-retires former exec…
Lender Processing Services (LPS) has been fighting a difficult battle on several fronts. Its stock plummeted 52% over the past six months, primarily because it missed its earnings guidance in both quarters. It didn’t help that Jeffrey Carbiener resigned as chief executive, president, and director in July for health reasons. Nor that the mortgage services and technology provider has faced a lawsuit since August for allegedly “robo-signing” mortgage documents. The plaintiff, Texas-based American Home Mortgage Servicing, claims losses in legal fees worth millions of dollars.
Little surprise, then, that LPS called up Hugh Harris — out of retirement — just last Wednesday to replace Carbiener as permanent chief executive, president, and director. In press releases, LPS has hailed Harris as both a visionary leader [PDF] and an industry veteran. And not for nothing. Harris was President of the Financial Services Technology division at LPS’s former parent, Fidelity National Financial (FNF), until he retired in 2007. His industry experience and history with the company are probably what drew LPS to him, not to mention what convinced him to interrupt his retirement.
But calling Harris out of retirement won’t be cheap, according to this 8-K filed last week. While the filing didn’t include the actual employment agreement, it did give some of the details: an $880,000 base salary, a 165% bonus target (that’s $1.45 million), and an incentive of $375,000 if Harris sticks around until March 2012. That works out to an extra $2,500 a day, just for showing up through March.
Harris’s bonus is 15% higher than his predecessor Carbiener’s, but the base salary is the same, as outlined in LPS’s latest proxy.
In the end, there’s a delicate balance between paying too little and paying too much. More so given that the cost for this executive shuffle goes beyond Harris’s pay package: LPS promised Carbiener, the ex-CEO, and Executive Chairman Lee Kennedy each $880,000 a year through the end of 2012; Carbiener is working as a senior advisor, according to an 8-K filed July 7, while Kennedy’s pay comes for serving as interim CEO (and continues even though he is giving up that role). Given what shareholders have been through, paying three people hefty salaries seems more than a bit excessive.
We’ve seen retired heroes returned to action in other contexts to restore the public’s faith, with mixed results. Michael Jordan succeeded twice, but UBS has been less fortunate since it brought Oswald Grâåbel back from retirement in 2009 — its shares surged 16.2% that day, but Grâåbel was forced out again in the recent trading scandal, apparently before he could finish the job. Whether Harris is a Jordan or a Grâåbel, only time will tell.
This post was written by footnoted intern Andy Cheng, a junior at the University of Chicago.
Find important pieces of the mosaic for your portfolio at footnotedPro. We bring to your desk quality research on key issues — well in advance of the market. For more information or to inquire about a trial subscription, please contact us.